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The Brief: Founders first funding, artificial gravel, East African agribusiness, climate financing’s virtuous cycles



Greetings, Agents of Impact! 

The Call No. 21: Election Impact. Blue Haven Initiative’s Liesel Pritzker said “Yes!” when ImpactAlpha challenged impact investors to 10x their impact – and urged them to invest in policy and civics as well. Pritzker cited the work of Issue One and All In in protecting voting rights and encouraging student civic engagement, and suggested a wealth tax to fund universal childcare, student loan relief, tax credits for low-income families and public health. Pritzker will discuss the role of impact investors in this fall’s U.S. election with Beeck Center’s Sonal Shah, Nonprofit Finance Fund’s Antony Bugg-Levine, i(x) investment’s Trevor Neilson and other Agents of Impact. Join hosts David Bank and Monique Aiken for a provocative conversation on The Call, Thursday, July 30 at 10am PT / 1pm ET / 6pm London. RSVP today.

Featured: ImpactAlpha Original

Q&A with Founders First’s Kim Folsom: Helping diverse founders grow businesses with revenue-based financing. The U.S. focus on racial justice has expanded to include equity in finance and investing. Implicit bias in venture capital and structural discrimination in lending have left many women founders and founders of color without access to capital. Entrepreneur-turned-investor Kim Folsom last year raised $100 million in debt capital for Founders First Capital to provide revenue-based financing and support to 500 service-based businesses founded by women, people of color and military veterans. That makes Folsom one of the largest “alt-capital” providers to diverse-led businesses. In a Q&A with ImpactAlpha, Folsom explains how investors with flexible deal structures and ecosystems of support can help diverse founders start businesses – and grow them into job engines for a diverse workforce. After expanding from San Diego to Dallas and Austin, Folsom is headed to Chicago and other cities with large, diverse populations to fill capital gaps left by legacy business financiers. 

Folsom says overcoming business funding challenges facing women and founders of color is fundamental to solving underlying social and racial economic inequality. Recent research suggests equity-like and hybrid capital can boost investment in operating businesses and close capital gaps for Black and Latinx entrepreneurs. Financing based on a share of revenues requires enterprises to have customers, rather than collateral, and lets founders retain ownership and control. Royalty distributions can alleviate the need for a sale or IPO to return investor capital. “The fastest growing and largest group of diverse employers are other diverse founders,” Folsom says. “People think that we’re funding yoga shops and coffee shops. That’s not true. Our companies are essential solution providers to mid- and large-scale businesses.”

Keep reading ImpactAlpha’s Q&A with Founders First’s Kim Folsom, “Helping diverse founders grow businesses with revenue-based financing,” by Dennis Price.

Dealflow: Follow the Money

CEMEX Ventures invests in plastics upcycling company Arqlite SPC. California-based Arqlite collects and converts unrecyclable plastics, like laminate, packaging and mixed-use materials, into “artificial gravel” for construction and landscaping. Mexico-based CEMEX, one of the largest cement producers in the world, cited the potential “to help mitigate the great problem of plastic waste and, simultaneously, to produce construction materials with a low CO2 footprint.” CEMEX’s venture capital arm invested an undisclosed amount (see, Corporates turn to strategic investments to drive sustainable innovation).

Grassroots Business Fund secures $1 million for East African agribusiness finance. The impact investor will invest in women- and youth-led small businesses in food and agriculture. The Africa-focused Trade and Development Bank committed the funds, backed by a 50% guarantee from the African Guarantee Fund. (Loans to women-owned businesses, apparently considered riskier, are guaranteed up to 75%.) The TDB and African Guarantee Fund kicked in a combined $110,000 for technical assistance. 

Impact Voices: Pass the Mic

The world is arriving at where climate investors have long been. The U.S. and Siberia are gripped by a blistering heat wave. Rising temperatures are starting to make parts of the Earth uninhabitable. The great climate migration has begun, report The New York Times and ProPublica. Our oceans are overfished and species are going extinct. The dials on a dashboard of indicators of our future “would be flashing a desperate shade of red and horns would be blaring,” Spring Lane Capital’s Christian Zabbal writes in a guest post on ImpactAlpha. And yet the colors of some of the dials are starting to turn greener: 

  • Virtuous cycles. Electric car sales are growing by 63% a year; traditional cars less than 5%. The global food market is growing at 4% a year; the growth of sustainable foods is three times that. Same for sustainable fisheries and green chemistry suppliers. “More and more capital is being allocated to ‘green’ solutions and funds,” Zabbal writes, “a recognition that the sustainable alternative, in more and more verticals, is where the growth will happen over the coming decades.”
  • End-game. “There are no reinforcements today coming for coal and petrol cars and open-ocean rogue fisheries and large-scale plantations, while there are a thousand startups, billions of capital, and 80 million Millennial consumers coming online on the side of sustainability,” Zabbal says. “It will take years, decades, and untold more damage and toil before the war is over, but the balance of power has shifted now.”
  • Keep reading, The world is arriving at where climate investors have long been,” by Christian Zabbal on ImpactAlpha.

Agents of Impact: Follow the Talent

Richenda Van Leeuwen, ex- of Rocky Mountain Institute and the United Nations Foundation, will become ANDE’s executive director, starting Sept. 1… Laurie Spengler of Courageous Capital Advisors and Alex Silva of Omtrix have joined the board of Global Partnerships… PIMCO seeks an ESG sustainability research analyst in Newport Beach, Calif…. Microsoft is recruiting a chief of staff for sustainability in Redmond, Wash.

Thank you for reading.

–July 28, 2020

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